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Incorporating Equity in Regulatory and Benefit-Cost Analysis Using Risk Based Preferences

Author

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  • Scott Farrow

    () (UMBC)

Abstract

Governmental guidance for regulatory and benefit-cost analysis is targeted for applied analysts. Existing Federal guidance recommends sensitivity analysis in general without being specific regarding the implicit distributional assumptions of standard benefit-cost analysis. Recommendations for Federal guidance are developed to: 1) better communicate expectations for distributional analysis, 2) develop guidance for descriptive statistics related to distributional issues, and 3) integrate Government published measures of inequality aversion and to evaluate compensation for identified sensitive populations. While such actions have a data collection and analysis cost, they may make the results of regulatory analysis more relevant by investigating both efficiency and equity measures.

Suggested Citation

  • Scott Farrow, 2009. "Incorporating Equity in Regulatory and Benefit-Cost Analysis Using Risk Based Preferences," UMBC Economics Department Working Papers 09-117, UMBC Department of Economics.
  • Handle: RePEc:umb:econwp:09117
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    File URL: http://www.umbc.edu/economics/wpapers/wp_09_117.pdf
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    References listed on IDEAS

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    1. A. Atkinson, 2008. "More on the measurement of inequality," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 6(3), pages 277-283, September.
    2. Farrow, Scott, 1998. "Environmental equity and sustainability: rejecting the Kaldor-Hicks criteria," Ecological Economics, Elsevier, vol. 27(2), pages 183-188, November.
    3. Layard, R. & Mayraz, G. & Nickell, S., 2008. "The marginal utility of income," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1846-1857, August.
    4. Kerry Krutilla, 2005. "Using the Kaldor-Hicks tableau format for cost-benefit analysis and policy evaluation," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 24(4), pages 864-875.
    5. Boadway, Robin W, 1974. "The Welfare Foundations of Cost-Benefit Analysis," Economic Journal, Royal Economic Society, vol. 84(336), pages 926-939, December.
    6. Don Fullerton, 2001. "A Framework to Compare Environmental Policies," Southern Economic Journal, Southern Economic Association, vol. 68(2), pages 224-248, October.
    7. Robert W. Hahn & Patrick M. Dudley, 2007. "How Well Does the U.S. Government Do Benefit-Cost Analysis?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 1(2), pages 192-211, Summer.
    8. repec:reg:rpubli:299 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Lisa A. Robinson & James K. Hammitt, 2013. "Behavioral economics and the conduct of benefit–cost analysis: towards principles and standards," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 10, pages 317-363 Edward Elgar Publishing.
    2. Loomis John B, 2011. "Incorporating Distributional Issues into Benefit Cost Analysis: Why, How, and Two Empirical Examples Using Non-market Valuation," Journal of Benefit-Cost Analysis, De Gruyter, vol. 2(1), pages 1-24, January.
    3. John B. Loomis, 2013. "Incorporating distributional issues into benefit–cost analysis: why, how, and two empirical examples using non-market valuation," Chapters,in: Principles and Standards for Benefit–Cost Analysis, chapter 9, pages 294-316 Edward Elgar Publishing.

    More about this item

    Keywords

    benefit; risk; equity; distribution; income;

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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